Forming a family business is an exciting way to do what you love with the people you love, as you and your parents, siblings, or other relatives work to make your entrepreneurial dreams a reality. In a family-owned business, the members have the advantage of already knowing each other and therefore understanding their respective talents, resources, and limitations. However, this doesn’t mean that internal disputes won’t threaten to trigger an expensive lawsuit, derail the enterprise, and cause bad blood among the family members.

If there is a potential problem with your family-owned business, or legal action has been threatened or initiated, it’s time to get serious about your rights and interests in the company. It starts with retaining the knowledgeable Manhattan business litigation firm of Levy Goldenberg LLP.

Issues That Arise in Family-Owned Businesses

Although there are many benefits to operating a business with your family, there are various challenges that may emerge as well. Some of these could lead to litigation, which may prove disastrous to your financial and domestic well-being. A few common examples include:

  • Lack of succession planning: Owners use business succession planning to determine who will step into a leadership role when they retire, pass away, or otherwise leave the company. Without a business succession plan, the remaining owners may quarrel with one another over who should fill the absence you left behind.
  • Family rivalries: Similarly, there are instances in which family members vie with one other for control of or influence over the company. A turf war could break out and factions could emerge much more easily due, ironically, to the closeness of the owners.
  • Poor communication: Many things are taken for granted in family-owned companies, including the need for clear communication on business matters. A simple misunderstanding or inattention to detail could cause a major dispute to erupt among the owners.
  • Poor judgment: Doing business with family can cause short-sightedness. One may overestimate the talents and abilities of a parent or sibling and simply hire them for the sake of employing a loved one. Selecting someone to help run the company based solely on kinship could lead to disaster.
  • Emotional attachments: A specific example of a bad judgment is allowing emotional considerations to cloud prudent decision-making. Emotional attachment can stymie innovation and necessary changes. Businesses owners must remember that the well-being of their co-owners and employees is at stake.
  • Generational disputes: Family-owned businesses tend to be passed down from one generation to the next, but there is often resistance to new ways of doing business. The upcoming generation of owners may have a different vision or business strategy that can conflict with established methods and values.
  • Crossing boundaries: Everyone deserves to have a healthy work-life balance, and it is fairly easy to maintain in the traditional business model. Family businesses can be different. A relative may be expected to work overtime without additional compensation, to work odd hours or on weekends, or to take on new roles without a promotion.
  • Conflict resolution: Conflicts are inevitable in any business, but the interpersonal and emotional dynamics are more pressing in family-owned companies. Although resolution is possible with the assistance of a mediator or other third-party, it is more difficult both to achieve and maintain.
  • Fiduciary breaches: Business owners are expected to abide by certain fiduciary duties, such as loyalty to the company and impartiality in dealing with other owners. But breaches are unfortunately common. An owner may decide to self-deal or prioritize their own needs and interests, harming the family business in the process.

How to Prevent Family Business Disputes

If you and your family want to start a business (or you have already launched it), you should consult a knowledgeable Manhattan business lawyer for strategies that can help avoid the above and other problems. Your attorney can assist in the following ways:

  • Providing objective advice: Objective financial and legal decision-making, unclouded by familial and emotional connections, is essential. So, too, is an understanding of the liabilities that attach to running a business. Your attorney should be prepared to provide an independent assessment of your risks and offer reasonable solutions to problems.
  • Executing contracts: Partnership agreements and other contracts among business owners can help curtail most problems. You should never enter into a family business relationship without sound, comprehensive agreements in place to govern it.
  • Establishing policies and procedures: Having a policies and procedures handbook can help your family business manage itself by providing clear standards that apply to everyone, as well as methods of handling disagreements and making important decisions.
  • Clarifying expectations: An attorney can help you and your family members see the bigger picture of running a business, which will help everyone better understand their role in the company. By properly defining each owner’s contribution to and responsibility for the business, litigation becomes less of an existential threat.
  • Conducting alternative dispute resolution: Internal conflicts do not have to spark a lawsuit. Family-owned businesses face many of the problems that all companies do, and alternative dispute resolution methods such as mediation can help. We are able to represent you during this process to settle outstanding issues and move you and your business forward.

When Litigation Becomes Necessary

Despite your best efforts, litigation may be inevitable or perhaps even desirable. There are sometimes situations in which another owner persists in bad decision-making, continues to abuse their authority within the company, or just won’t step down for the good of everyone else. Whether you are named as a defendant in a lawsuit or you need to initiate litigation to protect your and the other owners’ interests, the Manhattan law firm of Levy Goldenberg LLP is ready to serve you.

We assist with all aspects of business litigation, including:

  • Reviewing the details of your dispute and advising as to your legal options
  • Analyzing the plaintiff’s allegations and your potential defenses if a lawsuit has already begun
  • Investigating the factual circumstances surrounding the lawsuit
  • Drafting, filing, and serving all pleadings and court papers
  • Handling discovery and responding to discovery requests and objections
  • Engaging in mediation and other pretrial negotiations
  • Drafting and revising settlement agreements
  • Conducting trials and hearings and preparing your business for a potential appeal

Contact Our Manhattan Business Law Attorney

If a dispute has arisen in your family-owned business, or you wish to reduce the chances that one will, reach out to the experienced business lawyers of Levy Goldenberg LLP. We can develop a personalized strategy for litigating your business matter while working towards a mutually agreeable resolution. Connect with us today to get started.